MNCs, Rents, and Corruption: Evidence from China

American Journal of Political Science, Vol. 61, No. 1, pp. 84-99, 2017

63 Pages Posted: 21 May 2016 Last revised: 19 Apr 2017

See all articles by Boliang Zhu

Boliang Zhu

Pennsylvania State University - Department of Political Science

Date Written: May 20, 2016

Abstract

How does multinational corporation (MNC) activity affect corruption in developing countries? The existing literature tends to suggest that economic integration helps reduce corruption, as it increases market competition and efficiency and promotes the diffusion of good governance. In this article, I argue that such a generalization oversimplifies the consequences of MNC activity in host countries. The entry and presence of MNCs may contribute to rent creation in developing countries, thereby leading to a high level of corruption. To test this argument, I conduct a case study on China and draw from original data of filed corruption cases to construct measures of corruption. I find that provinces with more MNC activity are strongly associated with more corruption. The results are robust and consistent when possible endogeneity, law enforcement, and alternative measures of corruption are considered. This finding has important implications for domestic governance in developing countries.

Keywords: Multinational Corporations, Foreign Direct Investment, Market Concentration, Rents, Corruption, China

Suggested Citation

Zhu, Boliang, MNCs, Rents, and Corruption: Evidence from China (May 20, 2016). American Journal of Political Science, Vol. 61, No. 1, pp. 84-99, 2017. Available at SSRN: https://ssrn.com/abstract=2782439

Boliang Zhu (Contact Author)

Pennsylvania State University - Department of Political Science ( email )

University Park, State College, PA 16801
United States

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